Updated reference to insurance legislation

2012 legislation updates to references relating to insurance businesses.

Section 91AAQ of the Tax Administration Act 1994

Section 91AAQ of the Tax Administration Act 1994 includes several references to "a business of insurance registered and rated under the Insurance Companies (Ratings and Inspection) Act 1994".

These references have been updated to refer to a business of insurance that is subject to section 60(1) of the Insurance (Prudential Supervision) Act 2010.

Background

On 7 March 2012, the Insurance Companies (Ratings and Inspection) Act 1994 was repealed. This was because the requirements in this Act had been superseded by equivalent requirements in the Insurance (Prudential Supervision) Act 2010.

The policy reason for having the reference to "a business of insurance registered and rated under the Insurance Companies (Ratings and Inspection) Act 1994", was that this was a proxy for having a retail insurance business in New Zealand. This Act required insurers to have a current credit rating from an approved rating agency which was published on the Companies Office website. A key feature of this Act is that it did not apply to "captive" insurers. A captive insurer is a company that only insures risks from related parties.

Key features

The requirement in section 91AAQ for a business of insurance to be registered and rated under the Insurance Companies (Ratings and Inspection) Act 1994 has been replaced by the requirement for a business of insurance to be subject to section 60(1) of the Insurance (Prudential Supervision) Act 2010.

Section 60(1) requires licensed insurers to have a current credit rating from an approved rating agency. Due to section 60(2), section 60(1) does not apply to "captive" insurers or insurers whose only business is reinsurance. A captive insurer is defined in section 6(1) as an insurer that is a subsidiary of a non-insurance parent and that only insures risks of that parent or of other subsidiaries of the parent.

Currently, most insurers only have a provisional licence as they are not required to be fully licenced until September 2013. Under section 247 of the Insurance (Prudential Supervision) Act 2010, provisionally licensed insurers only need to comply with the requirements in this Act to the extent that the conditions of their provisional licence require them to comply. However, because the definition of "licensed insurer" in section 6 of the Act includes provisionally licensed insurers, provisionally licensed insurers may be regarded as being subject to section 60(1) of the Act.

Application date

The amendment applies from 7 March 2012 as this was the date that the Insurance Companies (Ratings and Inspection) Act 1994 was repealed.